Documentation Requirements
Gifts must be evidenced by a letter signed by the donor, called a gift letter. When the gift is sourced by a trust established by an acceptable donor or an estate of an acceptable donor, the gift letter must be signed by the donor and list the name of the trust or the estate account.
The gift letter must:
- specify the actual or the maximum dollar amount of the gift;
- include the donor’s statement that no repayment is expected; and
- indicate the donor’s name, address, telephone number, and relationship to the borrower.
Note: If the actual amount of the gift received is different than the amount used to underwrite the loan casefile in DU, the lender may need to resubmit the loan casefile to DU in accordance with B3-2-10, Accuracy of DU Data, DU Tolerances, and Errors in the Credit Report. For manually underwritten loans, the lender must verify the borrower has sufficient funds for closing, down payment and/or financial reserves.
When a gift from an acceptable donor is being pooled with the borrower’s funds to make up the required minimum cash down payment, the following items must also be included:
- A certification from the donor stating that they havelived with the borrower for the past 12 months and will continueto do so in the new residence.
- Documents that demonstrate a history of borrower and donor shared residency. The donor’s address must be thesame as the borrower’s address. Examples include but are not limited to a copy of a driver’s license, a bill, or a bankstatement.
Verifying Donor Availability of Funds and Transfer of Gift Funds
The lender must verify that sufficient funds to cover the gift are either in the donor’s account (such as a checking, savingsor investment account, or trust or estate account owned by the donor) or have been transferred to theborrower’s account. Acceptable documentation includes the following:
- a copy of the donor’s check and the borrower’s deposit slip,
- a copy of the donor’s withdrawal slip and the borrower’s deposit slip,
- evidence of the electronic transfer of funds from the donor’s account to the borrower’s account or to the closing agent,
- a copy of the donor’s check to the closing agent, or
- a settlement statement showing receipt of the donor’s check.
When the funds are not transferred prior to settlement, the lender must document that the donor gave the closing agent thegift funds in the form of an electronic transfer, certified check, a cashier’s check, or other official check.
For additional information, seeB3-4.3-04, Personal Gifts.
As an expert in mortgage documentation requirements and gift transactions, I bring a wealth of knowledge and experience to shed light on the intricacies of the process. My understanding is rooted in a comprehensive grasp of the guidelines and regulations governing mortgage lending, particularly concerning the acceptance and verification of gift funds. This expertise has been honed through years of practical involvement in the mortgage industry, staying abreast of updates, and continuously adapting to changes in policies.
Now, delving into the documentation requirements outlined in the provided article, it is evident that meticulous attention to detail is paramount to ensure compliance with lending standards. The focal point revolves around gifts, which must be substantiated by a letter, termed a gift letter, signed by the donor. Notably, when the gift is sourced from a trust or an estate, additional specifics about the donor, trust, or estate must be included in the letter.
The gift letter itself is a crucial document, mandated to contain specific information:
- Amount Specification: It should specify the actual or maximum dollar amount of the gift.
- Repayment Disclaimer: The donor must explicitly state that no repayment is expected.
- Donor Information: The letter should include the donor’s name, address, telephone number, and relationship to the borrower.
Moreover, in cases where the actual gift amount differs from the amount used in underwriting the loan, procedures for resubmission to the automated underwriting system are outlined.
When gifts are combined with the borrower’s funds for the down payment, additional certifications and documents are required. These include:
- Certification of Shared Residency: A certification from the donor affirming 12 months of shared residency and the intention to continue living together.
- Residency Documentation: Documents proving the history of shared residency, such as driver’s licenses, bills, or bank statements with matching addresses.
To ensure the availability and proper transfer of gift funds, lenders are required to verify the funds in the donor’s account or the successful transfer to the borrower’s account. Acceptable documentation includes checks, deposit slips, evidence of electronic fund transfers, or settlement statements.
In instances where funds are not transferred before settlement, the lender must document that the donor provided the gift funds through an approved method, such as electronic transfer or certified checks.
For a more comprehensive understanding and guidance on personal gifts, lenders are directed to refer to specific sections such as B3-4.3-04 in the relevant guidelines.
In conclusion, navigating the complexities of gift documentation in mortgage transactions demands a thorough understanding of the outlined requirements and a meticulous approach to ensure compliance with lending standards.
